Absolent Air Care Group AB (publ) (STO:ABSO) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Absolent Air Care Group AB (publ) (STO:ABSO) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Absolent Air Care Group's shares before the 16th of May in order to receive the dividend, which the company will pay on the 22nd of May.

The company's next dividend payment will be kr03.25 per share, on the back of last year when the company paid a total of kr3.25 to shareholders. Based on the last year's worth of payments, Absolent Air Care Group stock has a trailing yield of around 1.4% on the current share price of kr0235.00. If you buy this business for its dividend, you should have an idea of whether Absolent Air Care Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Absolent Air Care Group paid out a comfortable 34% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 30% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Absolent Air Care Group

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Absolent Air Care Group, with earnings per share up 7.6% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Absolent Air Care Group has lifted its dividend by approximately 18% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Absolent Air Care Group got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Absolent Air Care Group is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Absolent Air Care Group is being conservative with its dividend payouts and could still perform reasonably over the long run. Absolent Air Care Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of Absolent Air Care Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.